<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER 0-13563
DAMSON/BIRTCHER REALTY INCOME FUND-I
(Exact name of registrant as specified in its charter)
Pennsylvania 13-3264491
------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
27611 La Paz Road, Laguna Niguel, California 92656
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(714) 643-7700
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months and (2) has been subject to such filing requirements
for the past ninety days.
Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's registration statement on Form S-11 (Commission
File No. 2-91065), dated June 22, 1985, as supplemented, filed under the
Securities Act of 1933 are incorporated by reference into PART IV of this
report.
<PAGE> 2
DAMSON/BIRTCHER REALTY INCOME FUND-I
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I
Item 1. Business......................................................... 3
Item 2. Properties....................................................... 6
Item 3. Legal Proceedings................................................ 7
Item 4. Submission of Matters to a Vote of
Security Holders............................................... 7
PART II
Item 5. Market for the Registrant's Limited Partnership
Interests and Related Security Holder Matters.................. 7
Item 6. Selected Financial Data.......................................... 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 10
Item 8. Financial Statements and Supplementary Data...................... F-1
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................ 19
PART III
Item 10. Directors and Executive Officers of the Registrant............... 19
Item 11. Executive Compensation........................................... 19
Item 12. Security Ownership of Certain Beneficial Owners
and Management................................................. 20
Item 13. Certain Relationships and Related Transactions................... 20
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................................ 20
--- Signatures....................................................... 23
</TABLE>
-2-
<PAGE> 3
DAMSON/BIRTCHER REALTY INCOME FUND-I
PART I
Item 1. Business
Damson/Birtcher Realty Income Fund-I (the "Partnership") is a limited
partnership formed on May 7, 1984, under the laws of the Commonwealth of
Pennsylvania. The General Partner of the Partnership is Damson/Birtcher
Partners, a general partnership consisting of LF Special Fund II, L.P., a
California limited partnership and Birtcher Partners, a California general
partnership. The Partnership is engaged in the business of operating
income-producing office buildings, research and development facilities, shopping
centers and other commercial or industrial properties acquired by the
Partnership in 1984 and 1985. Each of the Partnership's properties was specified
in its prospectus (Commission File No. 2-91065) dated June 22, 1985, as amended.
See Item 2 for a description of the properties acquired by the Partnership.
The Partnership commenced operations on December 18, 1984. As of September 17,
1985, the Partnership was fully subscribed and had admitted Limited Partners
with total capital contributions of $97,198,000.
The Partnership acquired the properties during the period from December 19, 1984
through September 18, 1985, entirely for cash, free and clear of mortgage
indebtedness. In September 1987, the Partnership borrowed $4,000,000 pursuant to
a loan agreement secured by a First Deed of Trust on the Certified Distribution
Center in Salt Lake City, Utah. The net proceeds were used primarily for capital
improvements and leasing commissions on certain of the Partnership's properties,
the Partnership's working capital reserves and certain general and
administrative expenses. The General Partner, upon inquiry, was informed in
February 1992, that the Partnership's lender did not intend to extend the loan
secured by Certified Distribution Center past its maturity date of December 1,
1993. Therefore, on July 30, 1993 the Partnership obtained a new loan secured by
a First Deed of Trust on the property. The new loan in the amount of $3,500,000
carries a fixed interest rate of 9% per annum over a 13 year fully amortizing
term and a prepayment penalty of approximately $600,000 at current interest
rates if fully paid off after July 1, 1998. In March 1996, the Partnership
entered into a loan agreement pursuant to which it could have borrowed up to
$1,500,000, evidenced by a note secured by a first deed of trust and financing
statement on the Ladera I Shopping Center in Albuquerque, New Mexico. Pursuant
to that note arrangement, the Partnership borrowed $700,000 to fund a portion of
the renovation and tenant improvements at The Cornerstone and tenant
improvements at Oakpointe. The loan was subsequently paid off in November 1996
utilizing a portion of the sale proceeds from Arlington Executive Plaza. The
Partnership may incur unsecured indebtedness from time to time to supplement its
working capital needs. See Note 6 to Financial Statements in Item 8.
The Partnership's objectives in operating the properties are: (i) to make
regular quarterly cash distributions to the Partners, of which a portion will be
tax sheltered; (ii) to achieve capital appreciation over a holding period of at
least five years; and (iii) to preserve and protect the Partnership's capital.
An Information Statement, dated May 5, 1993, mandated that the General Partner
shall seek a vote of the Limited Partners no later than December 31, 1996,
regarding prompt liquidation of the Partnership in the event that properties
with appraised values as of January 1993, which constituted at least one-half of
the aggregate appraised values of all Partnership properties as of that date,
are not sold or under contract for sale by the end of 1996.
-3-
<PAGE> 4
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 1. Business (Cont'd.)
Given the mandate of the May 5, 1993 Information Statement, the General Partner
decided to account for the Partnership's properties as assets held for sale,
instead of for investment as of December 31, 1995. In accordance with Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (see Note 2 to
the Financial Statements in Item 8), the carrying value of the properties was
evaluated to insure that each property is carried on the Partnership's balance
sheets at the lower of cost or fair value, less estimated selling costs.
Accordingly, the General Partner compared the carrying value of each property to
its appraised value as of January 1, 1996. If the carrying value of a property
and certain related assets was greater than its appraised value less estimated
selling costs, the General Partner reduced the carrying value of the property by
the difference. Using this methodology, the General Partner determined that The
Cornerstone, Ladera I Shopping Center, Terracentre, Arlington Executive Plaza
and Washington Technical Center, had carrying values greater than their
appraised values, and therefore reduced their carrying values to $9,032,000,
$6,234,000, $2,397,000, $2,740,000, and $2,612,000, respectively. Since adoption
of the 1993 Solicitation, the General Partner has considered several preliminary
indications of interest from third parties to acquire some or all of the
Partnership's properties. Apart from the sale of Arlington, however, these
transactions never materialized, primarily because the General Partner rejected
as too low the valuations of the Partnership's properties proposed by the
potential purchasers.
In 1996, the Partnership made certain capital improvements that resulted in a
corresponding increase in the properties' valuation allowance. At December 31,
1996, the General Partner compared the carrying value of each property to its
appraised value as of January 1, 1997 and determined that The Cornerstone,
Ladera-I Shopping Center and Oakpointe had carrying values greater than their
appraised values. As a result, during the year ended December 31, 1996 their
carrying values were adjusted by $1,683,000, $398,000, and $253,000 to
$8,960,000, $5,900,000, and $7,700,000, respectively. In addition, during 1996,
the carrying values of Terracentre and Washington Technical Center were
increased by $190,000 and $246,000 to their estimated fair values less estimated
selling costs of $2,900,000 and $3,020,000, respectively.
On February 18, 1997, the General Partner mailed a Consent Solicitation to the
Limited Partners which sought their consent to dissolve the Partnership and sell
and liquidate all of its remaining properties as soon as practicable, consistent
with obtaining reasonable value for the Partnership's properties. A majority in
interest of the Limited Partners consented by March 14, 1997. As a result, the
Partnership has adopted the liquidation basis of accounting as of March 31,
1997. The difference between the adoption of the liquidation basis of accounting
as of March 14, 1997 and March 31, 1997 was not material.
Under the liquidation basis of accounting, assets are stated at their estimated
net realizable values and liabilities are stated at their anticipated settlement
amounts. The valuation of assets and liabilities necessarily requires many
estimates and assumptions, and there are substantial uncertainties in carrying
out the dissolution of the Partnership. The actual values upon dissolution and
-4-
<PAGE> 5
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 1. Business (Cont'd.)
costs associated therewith could be higher or lower than the amounts recorded.
Since the approval of the February 18, 1997 Consent Solicitation, the General
Partner has been evaluating possible sales of Partnership properties,
individually and as a portfolio, to liquidate and wind up the Partnership.
Recently, the General Partner has solicited several offers from prospective
purchasers to acquire all of the Partnership's remaining properties in a single
transaction. The General Partner is evaluating these offers, and expects to
either accept an offer or counter one or more of the offers soon. The offers are
substantially similar in price, and value the Partnership's remaining properties
on a collective basis at the high end of the range that the General Partner
previously discussed in the February 18, 1997 Consent Solicitation. To help
evaluate these offers, the General Partner is also evaluating local market
conditions and potential sales of the properties on an individual basis. There
can be no assurance as to when or at what price properties will be sold. If an
agreement can be reached to sell the properties in a single transaction, the
General Partner expects to complete such a transaction in 1998.
The Partnership derives most of its revenue from rental income. Both Certified
Warehouse and Transfer Company, Inc. ("Certified") and FIserv, Inc. ("FIserv",
formerly d.b.a. Citicorp CIR, Inc.) represent significant portions of such
income. Rental income from Certified totaled $872,000 in 1997, $1,007,000 in
1996, and $984,000 in 1995 or approximately 15%, 16% and 17%, respectively, of
the Partnership's total rental income. Rental income from FIserv totaled
$869,000 in 1997, $887,000 in 1996 and $880,000 in 1995, or approximately 15%,
14% and 15%, respectively, of the Partnership's total rental income.
Certified's lease expired on September 20, 1997, at which time it vacated
approximately 61% of its space. It continued to pay rent on its remaining space
through November 1997, at which time it vacated the property entirely. The
General Partner leased 123,074 square feet (39%) to a different tenant for a
three-year term commencing March 1, 1998 for $406,000 per year, which is greater
than Certified had been paying on a per square foot basis.
The Partnership's investments in real estate are subject to competition for
tenants from similar types of properties in the vicinities in which they are
located. The Partnership has no investments in real estate located outside the
United States.
The Partnership has no employees and, accordingly, the General Partner and its
affiliates perform services on behalf of the Partnership in connection with
administering the affairs of the Partnership and operating the Partnership's
properties. The General Partner and its affiliates receive compensation in
connection with such activities. See Item 11 and Note 3 to the Financial
Statements in Item 8 for a description of such charges.
-5-
<PAGE> 6
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 2. PROPERTIES
<TABLE>
<CAPTION>
NUMBER OF
NET TENANT PERCENTAGE
RENTABLE LEASES OCCUPIED
PURCHASE AREA IN AS OF AS OF
NAME/LOCATION/DATE ACQUIRED PRICE(1) DESCRIPTION SQ. FT. 12/31/97 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Washington Technical Center, $ 3,874,000 Four business center buildings 50,973 7 98%
Phase I located on 4.87 acres of land.
Renton, Washington
December 19, 1984
Certified Distribution Center 9,327,000 Two warehouse/distribution buildings 312,260 0 0%
Salt Lake City, Utah located on 12.65 acres of land.
April 2, 1985
Ladera Shopping Center, 8,543,000 A neighborhood retail shopping center 89,544 16 100%
Phase I located on 10.9 acres of land.
Albuquerque, New Mexico
May 10, 1985
The Cornerstone 17,618,000 A seven-building specialty retail 114,441 15 64%
Tempe, Arizona center located on 10.9 acres of land.
July 19, 1985
Terracentre 20,037,000 A 15-story office building located 95,723 13 82%
Denver, Colorado on .41 acres of land.
September 6, 1985
Oakpointe 9,517,000 Office building located on 6.8 acres 96,213 2 91%
Arlington Heights, Illinois of land.
September 18, 1985
TOTAL $68,916,000 759,154
=========== =======
</TABLE>
SEE NOTE TO TABLE ON THE FOLLOWING PAGE.
-6-
<PAGE> 7
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 2. PROPERTIES (Cont'd.)
NOTE TO TABLE ON THE PRECEDING PAGE
(1) The purchase price does not include an allocable share of the
$4,423,000 of acquisition fees paid to the General Partner. Also,
for certain properties, the purchase price has been reduced by
cash received after acquisition under rental agreements for
non-occupied space.
Item 3. LEGAL PROCEEDINGS
The Partnership is not a party to any material pending legal proceedings, other
than ordinary routine litigation incidental to its business. It is the General
Partner's belief that the outcome of these proceedings will not be material to
the business, financial condition, or results of operations of the Partnership.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND
RELATED SECURITY HOLDER MATTERS
There is no public market for the limited partnership interests and a market is
not expected to develop as such limited partnership interests are not publicly
traded or freely transferable.
As of February 28, 1998, the number of holders of the Partnership's interests is
as follows:
General Partner 1
Limited Partners 9,392
-----
9,393
=====
The Partnership makes quarterly cash distributions to its partners out of
distributable cash pursuant to the Partnership's Agreement of Limited
Partnership. Distributable cash from operations is generally paid 99% to the
Limited Partners and 1% to the General Partner.
The Partnership has paid the following quarterly cash distributions to its
Limited Partners:
-7-
<PAGE> 8
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND RELATED
SECURITY HOLDER MATTERS (Cont'd.)
<TABLE>
<CAPTION>
CALENDAR
QUARTERS 1998 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $253,000 $253,000 $ 0 $253,000 $370,000 $662,000
Second 253,000 0 253,000 370,000 486,000
Third 253,000 253,000 253,000 360,000 350,000
Fourth 253,000 1,753,000 0 369,000 370,000
</TABLE>
The Limited Partners and the General Partner are entitled to receive quarterly
cash distributions, as available, in the future. During 1995, the General
Partner temporarily suspended distributions for three quarters, commencing with
the last quarter of 1995, to fund a portion of the renovation and tenant
improvements at The Cornerstone and tenant improvements at Oakpointe and
Washington Technical Center.
In December 1996, the Partnership made a $1,500,000 special distribution to its
limited partners from a portion of the proceeds from the sale of Arlington
Executive Plaza. See Item 7, Liquidity and Capital Resources for further
discussion.
-8-
<PAGE> 9
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------------------------------------------
1997 1996 1995 1994 1993
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Revenues $ 1,489,000 $ 6,349,000 $ 5,973,000 $ 6,307,000 $6,525,000
=========== =========== ============ ============ ==========
Net Income (Loss):
General Partner $ 4,000 $ 4,000 $ (50,000) $ (56,000) $ (2,000)
Limited Partners 402,000 396,000 (4,922,000) (5,535,000) (193,000)
----------- ----------- ------------ ------------ -----------
$ 406,000 $ 400,000 $(4,972,000) $(5,591,000) $ (195,000)
=========== =========== ============ ============ ===========
Total Distributions:
General Partner $ 2,000 $ 5,000 $ 8,000 $ 15,000 $ 19,000
=========== =========== ============ ============ ==========
Limited Partners $ 253,000 $ 2,006,000 $ 759,000 $ 1,469,000 $1,868,000
=========== =========== ============ ============ ==========
</TABLE>
The following summary of financial data is for the period since the Partnership
adopted the liquidation basis of accounting.
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1, 1997 THROUGH
DECEMBER 31, 1997
---------------------
<S> <C>
Property Operating
Income, net $ 2,308,000
===========
Distributions to
Partners $ 767,000
===========
Net Assets in
Liquidation
at 12/31/97 $32,026,000
===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1996 1995 1994 1993
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Assets $36,482,000 $38,493,000 $44,292,000 $51,460,000
=========== =========== =========== ===========
Secured Loan Payable $ 2,932,000 $ 3,116,000 $ 3,285,000 $ 3,440,000
=========== =========== =========== ===========
</TABLE>
-9-
<PAGE> 10
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital Resources and Liquidity
Since the completion of its acquisition program in September 1985, the
Partnership has been primarily engaged in the operation of its properties. The
Partnership's original objective had been to hold its properties as long-term
investments. However, an Information Statement, dated May 5, 1993, mandated that
the General Partner seek a vote of the Limited Partners no later than December
31, 1996, regarding prompt liquidation of the Partnership in the event that
properties with appraised values as of January 1993 which constituted at least
one half of the aggregate appraised values of all Partnership properties as of
that date are not sold or under contract for sale by the end of 1996. Given the
mandate of the May 5, 1993 Information Statement, as of December 31, 1995, the
General Partner decided to account for the Partnership's properties as assets
held for sale, instead of for investment. In a Consent Solicitation dated
February 18, 1997, the Partnership solicited and received the consent of the
Limited Partners to dissolve the Partnership and sell and liquidate all of its
remaining properties as soon as practicable, consistent with selling the
Partnership's properties to the best advantage under the circumstances. The
Partnership's properties were held for sale throughout 1996 and 1997 and
continue to be held for sale.
Working capital is and will be principally provided from the operation of the
Partnership's properties and the working capital reserve established for the
properties. The Partnership may incur mortgage indebtedness relating to such
properties by borrowing funds primarily to fund capital improvements or to
obtain financing proceeds for distribution to the partners.
Regular distributions for the year ended December 31, 1997, represent net cash
flow generated from operations of the Partnership's properties and interest
earned on the temporary investment of working capital, net of capital reserve
requirements. In December 1996, the Partnership made a special distribution of
$1,500,000 representing a portion of net proceeds from the sale of Arlington
Executive Plaza. Future cash distributions will be made to the extent available
from net cash flow generated from operations and sales of the Partnership's
properties and interest earned on the investment of capital reserves, after
providing for capital reserves and payment for capital improvements and repairs
to the Partnership's properties. See Item 5 for a description of the
Partnership's distribution history. The Partnership believes that the cash
generated from its operations will provide the Partnership the funds necessary
to meet all of its ordinary obligations.
Certain of the Partnership's properties are not fully leased. The Partnership is
actively marketing the vacant space in these properties, subject to the
competitive environment in each of the market areas. To the extent the
Partnership is not successful in maintaining or increasing occupancy levels at
these properties, the Partnership's future cash flow and distributions may be
reduced.
-10-
<PAGE> 11
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Capital Resources and Liquidity (Cont'd.)
In June 1993, the Partnership completed its solicitation of written consents
from its Limited Partners. A majority in interest of the Partnership's Limited
Partners approved each of the proposals contained in the Information Statement,
dated May 5, 1993. Those proposals have been implemented by amending the
Partnership Agreement as contemplated by the Information Statement. The
amendments include, among other things, the payment of asset management and
leasing fees to the General Partner and the elimination of the General Partner's
residual interest and deferred leasing fees that were previously subordinated to
return of the Limited Partners' 9% Preferential Return. See Item 8, Note 3 to
the Financial Statements for discussion of fees paid to the General Partner for
the years ended December 31, 1997, 1996 and 1995.
On February 18, 1997, the General Partner mailed a Consent Solicitation to the
Limited Partners which sought their consent to dissolve the Partnership and sell
and liquidate all of its remaining properties as soon as practicable, consistent
with selling the Partnership's properties to the best advantage under the
circumstances. A majority in interest of the Limited Partners consented by March
14, 1997. As a result, the Partnership has adopted the liquidation basis of
accounting as of March 31, 1997. The difference between the adoption of the
liquidation basis of accounting as of March 14, 1997 and March 31, 1997 was not
material.
Under the liquidation basis of accounting, assets are stated at their estimated
net realizable values and liabilities are stated at their anticipated settlement
amounts. The valuation of assets and liabilities necessarily requires many
estimates and assumptions, and there are substantial uncertainties in carrying
out the dissolution of the Partnership. The actual values upon dissolution and
costs associated therewith could be higher or lower than the amounts recorded.
Since the approval of the February 18, 1997 Consent Solicitation, the General
Partner has been evaluating possible sales of Partnership properties,
individually and as a portfolio, to liquidate and wind up the Partnership.
Recently, the General Partner has solicited several offers from prospective
purchasers to acquire all of the Partnership's remaining properties in a single
transaction. The General Partner is evaluating these offers, and expects to
either accept an offer or counter one or more of the offers soon. The offers are
substantially similar in price, and value the Partnership's remaining properties
on a collective basis at the high end of the range that the General Partner
previously discussed in the February 18, 1997 Consent Solicitation. To help
evaluate these offers, the General Partner is also evaluating local market
conditions and potential sales of the properties on an individual basis. There
can be no assurance as to when or at what price properties will be sold. If an
agreement can be reached to sell the properties in a single transaction, the
General Partner expects to complete such a transaction in 1998.
In September 1987, the Partnership borrowed $4,000,000 pursuant to a loan
agreement secured by a First Deed of Trust on the Certified Distribution Center
in Salt Lake City, Utah. The net proceeds were used primarily for capital
improvements and leasing commissions on certain of the Partnership's properties,
the Partnership's working capital reserves and certain general and
administrative expenses. That loan matured on December 1, 1990, however, the
General Partner obtained a loan extension that was to mature December 1, 1993.
On July 20, 1993, the Partnership obtained a new loan secured by a First Deed of
Trust on the Certified Distribution Center in Salt Lake City, Utah.
-11-
<PAGE> 12
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Capital Resources and Liquidity (Cont'd.)
The new loan, in the amount of $3,500,000, carries a fixed interest rate of 9%
per annum over a 13-year fully amortizing term and a pre-payment penalty of
approximately $600,000 at current interest rates, if fully paid off after July
1, 1998. The Partnership's first payment of $38,000 was paid on September 1,
1993, with monthly installments due thereafter.
In March 1996, the Partnership entered into a loan agreement pursuant to which
it could borrow up to $1,500,000, evidenced by a note secured by a first deed of
trust and financing statement on the Ladera I Shopping Center in Albuquerque,
New Mexico. Pursuant to the note and loan agreement, the Partnership borrowed
$700,000 in March 1996. The Partnership made interest only payments at the rate
of 1% over prime (the loan rate was 9.25%) through November 1996, when the
entire balance was paid off utilizing a portion of the proceeds from the sale of
Arlington Executive Plaza. The net proceeds of the foregoing loan were used to
fund a portion of the renovation and tenant improvements at The Cornerstone and
tenant improvements at Oakpointe. The Partnership has the ability to borrow
against this credit facility (up to $1,500,000) through March 31, 1999, should
its cash requirements necessitate.
January 1, 1998 Property Appraisals and Net Asset Value
In accordance with the terms of the Partnership Agreement, each year the
Partnership secures an independent appraisal of each of the Partnership's
properties as of January 1. Prior to the January 1, 1995 appraisals, the
independent appraiser had estimated each property's "Investment Value,"
utilizing a seven to ten-year cash flow model to estimate value based upon an
income approach.
The amendment to the Partnership Agreement consented to by the Limited Partners
in June 1993 mandates, among other things, that the General Partner seek a vote
of (and provide an analysis and recommendation to) the Limited Partners no later
than December 31, 1996 regarding the prompt liquidation of the Partnership in
the event that properties with (then) current appraised values (constituting at
least one-half of the total (then) current appraised values) of all of the
Partnership's properties are not sold or under contract for sale by the end of
1996.
Given this mandate, the General Partner requested that the appraiser provide an
assessment of value that reflects a shorter investment holding term. Although
the General Partner does not know how long it will take to sell the
Partnership's remaining properties, it requested that the appraiser assume that
the entire portfolio would be sold over four years, in connection with the
January 1995 appraisals, over three years in connection with the January 1996
appraisals, over approximately two years in connection with the January 1997
appraisals and over the next year in connection with the January 1998
appraisals.
Using the shorter-term investment methodology that is consistent with the
mandate of the 1993 amendment to the Partnership agreement and liquidation of
the Partnership, the appraiser estimated the value of the Partnership's
remaining properties at January 1, 1998 to be $38,085,000, net of estimated
selling costs.
The foregoing appraised value of the Partnership's remaining properties
indicates an estimated net asset value in liquidation of $34,021,000 or $3,500
per $10,000 of original investor subscription. (Net assets in liquidation
represents the appraised value of the
-12-
<PAGE> 13
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Capital Resources and Liquidity (Cont'd.)
January 1, 1998 Property Appraisals and Net Asset Value (Cont'd.)
Partnership's properties, cash and all other assets less secured loans payable
and all other liabilities including accrued expenses for liquidation).
Other Matters
The General Partner and its affiliates are currently working to resolve the
potential impact of the year 2000 on the processing of date-sensitive
information by the Partnership's computerized information systems. The year 2000
problem is the result of computer programs being written using two digits
(rather than four) to define the applicable year. Any of the Partnership's
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in miscalculations
or system failures. Based on preliminary information, the cost of addressing
potential problems is not currently expected to have a material adverse impact
on the Partnership's financial position, results of operations or cash flows in
future periods. However, the inability of the General Partner and its affiliates
or their suppliers or distributors and other vendors to resolve such processing
issues in a timely manner could have a material adverse impact on the
Partnership. Accordingly, the General Partner and its affiliates plan to devote
the necessary resources to resolve all significant year 2000 issues in a timely
manner.
Results of Operations
Year Ended December 31, 1997
Because the Partnership adopted the liquidation basis of accounting on March 31,
1997, a comparison of the results of operations is not practical. The Statement
of Net Assets in Liquidation and Statement of Changes of Net Assets in
Liquidation reflect the Partnership in the process of liquidation. Prior
financial statements reflect the Partnership as a going concern. As the
Partnership's assets (properties) are sold, the results of operations will be
generated from a smaller asset base, and are therefore not comparable. The
Partnership's operating results have been reflected on the Statement of Changes
of Net Assets in Liquidation since March 31, 1997 (the date of adoption of the
liquidation basis of accounting), and Statement of Operations for the three
months ended March 31, 1997.
For the year ended December 31, 1997, the Partnership generated $3,209,000 of
net operating income from operation of its properties. The decrease for the year
ended December 31, 1997, when compared to 1996, was primarily the result of the
sale of Arlington Executive Plaza in November 1996 ($377,000), and an increased
property tax assessment at Oakpointe ($234,000) in 1997.
In September and November 1997, Certified Warehouse and Transfer Company, Inc.
vacated Certified Distribution Center. Although the General Partner successfully
completed negotiation of a 123,074 square foot lease with Quality Distribution
effective March 1, 1998 at a rate greater than before, the remaining 189,115
square foot vacancy will have a negative affect on future distributions of cash
from operations to the Limited Partners.
-13-
<PAGE> 14
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Results of Operations (Cont'd.)
Year Ended December 31, 1997 (Cont'd.)
Interest and other income resulted from the temporary investment of Partnership
working capital. For the years ended December 31, 1997 and 1996, interest and
other income was approximately $32,000 and $60,000, respectively.
General and administrative expenses for the year ended December 31, 1997,
include charges of $428,000 from the General Partner and its affiliates for
services rendered in connection with administering the affairs of the
Partnership and operating the Partnership's properties. Also included in general
and administrative expenses for the year ended December 31, 1997, are direct
charges of $815,000, relating to audit fees, tax preparation fees, legal fees
and professional services, liability insurance expenses, costs incurred in
providing information to the Limited Partners and other miscellaneous costs. The
increase in general and administrative expenses for the year ended December 31,
1997, as compared to 1996, was primarily attributable to the increase in legal
and professional services, printing costs, postage and mailing expenses
associated with the Partnership's solicitation of the Limited Partners consent
for the Liquidation of the Partnership in March 1997.
Accrued expenses for liquidation, as reflected in the Statement of Net Assets in
Liquidation as of December 31, 1997, are not included in results of operations
for the three month period ended March 31, 1997. The liquidation basis of
accounting was adopted on March 31, 1997, therefore, it was not appropriate to
include such adjustments in the results of operations for prior periods. Accrued
expenses for liquidation as of December 31, 1997, includes estimates of costs to
be incurred in carrying out the dissolution and liquidation of the Partnership.
These costs include estimates of legal fees, accounting fees, tax preparation
and filing fees, professional services, the general partner's liability
insurance and the pre-payment penalty associated with the anticipated early
retirement of the mortgage loan secured by the Certified Warehouse property. The
actual costs could vary significantly from the related provisions due to the
uncertainty related to the length of time required to complete the liquidation
and dissolution and the complexities which may arise in disposing of the
Partnership's remaining assets.
Interest expense resulted from interest on the first deed of trust on Certified
Distribution Center.
Year Ended December 31, 1996
The increase in rental income for the year ended December 31, 1996, when
compared to 1995, was primarily attributable to an increase in rental income at
Oakpointe. A new lease was signed in February 1996 with Symbol Technologies,
Inc. encompassing 22,801 square feet bringing Oakpointe to 100% leased.
The increase in interest and other income for the year ended December 31, 1996,
as compared to 1995 was attributable to an increase in The Cornerstone's other
miscellaneous income. This increase was partially offset by a decrease in
interest income due to a decrease in the average level of working capital
available for investment in 1996. Capital reserves were used to fund a portion
of the renovation and tenant improvements at
-14-
<PAGE> 15
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Results of Operations (Cont'd.)
Year Ended December 31, 1996 (Cont'd.)
The Cornerstone and tenant improvements at Oakpointe.
On November 21, 1996, the Partnership sold Arlington Executive Plaza, an office
complex composed of seven identical 10,428 square foot buildings located on 7.2
acres of land in Arlington Heights, Illinois to an unaffiliated third party. The
sales price was $3,050,000 ($2,929,000 net of commissions and escrow fees) and
the net proceeds of the sale amounted to approximately $2,699,000 after
factoring in all prorations and credits to the buyer. In December 1995, the
General Partner had adjusted the carrying value of the property in accordance
with the guidelines of FAS 121, which resulted in a write-down of $1,250,000 and
an adjusted carrying value of $2,740,000. The resulting gain on sale, after
taking into consideration all costs of disposition, amounted to $164,000 as
reflected in the Statement of Operations. The General Partner was not paid a
commission or disposition fee as part of this transaction.
The decrease in operating expenses for the year ended December 31, 1996, as
compared to 1995 was primarily attributable to the sale of Arlington Executive
Plaza in November 1996 and reduced legal and professional fees at The
Cornerstone and Terracentre.
The decrease in real estate taxes for the year ended December 31, 1996, when
compared to 1995 primarily relates to: 1)the sale of Arlington Executive Plaza
in November 1996 ($146,000); and, 2) a reduced tax assessment for Oakpointe in
1996 ($157,000).
General and administrative expenses for the year ended December 31, 1996 include
charges of $500,000 from the General Partner and its affiliates for services
rendered in connection with administering the affairs of the Partnership and
operating the Partnership's properties. Also included in general and
administrative expenses were direct charges of $482,000 relating to audit and
tax preparation fees, annual appraisal fees, legal fees, insurance expense,
costs incurred in providing information to the Limited Partners and other
miscellaneous costs.
The decrease in general and administrative expenses for the year ended December
31, 1996 as compared to 1995, was primarily attributable to decreases in
administrative expense reimbursements and leasing fees incurred in 1996. The
aforementioned decreases were partially offset by higher professional fees
incurred by the Partnership.
Interest expense resulted from interest on the first deed of trust on Certified
Distribution Center and the loan agreement secured by Ladera-I Shopping Center.
The increase in interest expense for the year ended December 31, 1996, as
compared to 1995, was a result of the borrowing of $700,000 in March 1996,
pursuant to that new loan arrangement. The Partnership subsequently paid off the
$700,000 note in November 1996.
For the year ended December 31, 1996, the General Partner determined that the
carrying values of The Cornerstone, Ladera-I Shopping Center and Oakpointe were
in excess of their respective appraised values. As a result, their carrying
values were adjusted by $1,683,000, $398,000, and $253,000 to $8,960,000,
$5,900,000, and $7,700,000, respectively. In addition, during 1996, the carrying
values of Terracentre and Washington Technical Center were increased by $190,000
and $246,000 to their estimated fair values less selling costs of $2,900,000 and
$3,020,000, respectively.
-15-
<PAGE> 16
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Results of Operations (Cont'd.)
Year Ended December 31, 1996 (Cont'd.)
The decrease in depreciation and amortization expenses for the year ended
December 31, 1996 as compared to 1995 was a result of the adoption and
implementation at December 31, 1995 of Statement of Financial Accounting
Standards, No. 121, "Accounting for the Impairment of Long-Lived Assets to Be
Disposed Of," pursuant to which "assets held for sale" are not depreciated.
Year Ended December 31, 1995
The decrease in rental income for the year ended December 31, 1995, as compared
to 1994, was primarily attributable to reduced rental income at The Cornerstone
and Oakpointe. At The Cornerstone, several small tenants terminated their leases
prior to or upon their respective scheduled termination during 1995. The
respective terminations resulted in a decrease in the property's occupancy rate
to 70% and decrease in rental income of $338,000. At Oakpointe, revenue
decreased by $153,000, which was primarily the result of the termination of the
Illinois Department of Employment Security lease in March 1994. Additionally,
common area expense reconciliations at Oakpointe resulted in a $36,000 refund of
tenant overpayment during 1995. The aforementioned decreases were partially
offset by an increase in rental income at Washington Technical Center and
Terracentre office building. At Washington Technical Center, revenue increased
by $108,000 because the Partnership entered into three leases encompassing
25,698 square feet in late 1994, and at Terracentre, revenue increased $103,000
because the Partnership entered into a 9,259 square foot lease.
Interest income resulted from the temporary investment of Partnership working
capital. Interest income was generally comparable to 1994. Other miscellaneous
income decreased at Terracentre and Oakpointe by $38,000 during 1995.
The decrease in operating expenses for the year ended December 31, 1995, as
compared to 1994, was primarily attributable to the overall decrease in legal
and professional services associated with minor tenant disputes and real estate
tax appeals relating to the Partnership's properties ($67,000).
The increase in real estate taxes for the year ended December 31, 1995, as
compared to 1994, was primarily attributable to the increases in taxes at The
Cornerstone and Oakpointe ($51,000). The aforementioned increase was partially
offset by a lower tax assessment at Washington Technical Center, which was the
result of a successful tax appeal during 1995 ($13,000) and a lower tax expense
at Arlington Executive Plaza ($28,000).
General and administrative expenses for the year ended December 31, 1995 include
charges of $588,000 from the General Partner and its affiliates for services
rendered in connection with administering the affairs of the Partnership and
operating the Partnership's properties. Also included in general and
administrative expenses were direct charges of $417,000 relating to audit and
tax preparation fees, annual appraisal fees, legal fees, insurance expense,
costs incurred in providing information to the Limited Partners and other
miscellaneous costs.
-16-
<PAGE> 17
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Results of Operations (Cont'd.)
Year Ended December 31, 1995 (Cont'd.)
The increase in general and administrative expenses for the year ended December
31, 1995 as compared to 1994, was primarily attributable to the increase in
legal and professional services, administrative wages and leasing fees. The
aforementioned increases were partially offset by lower asset management fees
paid to the General Partner.
Interest expense resulted from interest on the first deed of trust on Certified
Distribution Center. The decrease in interest expense for the year ended
December 31, 1995, as compared to 1994, was attributable to the increase in
principal payment of the loan, which carries a fixed rate of 9% per annum over a
13-year fully amortized term.
The decrease in depreciation and amortization for the year ended December 31,
1995, as compared to 1994, was attributable to the $5,500,000 adjustment to the
carrying value of real estate assets during 1994. As part of this adjustment,
the depreciable bases of Cornerstone Shopping Center, Terracentre office
building and Oakpointe were reduced in December 1994 by $3,150,000, $466,000 and
$704,000, respectively, with the remaining adjustment of $1,180,000 being
allocated to land.
Given the mandate of the May 5, 1993 Information Statement, the General Partner
decided to account for the Partnership's properties as assets held for sale,
instead of for investment as of December 31, 1995. Accordingly, the General
Partner compared the carrying value of each property to its appraised value as
of January 1, 1996. If the carrying value of a property and certain related
assets was greater than its appraised value, the General Partner reduced the
carrying value of the property by the difference. Using this methodology, the
General Partner determined that The Cornerstone, Ladera I Shopping Center,
Terracentre, Arlington Executive Plaza, and Washington Technical Center, had
carrying values greater than their appraised values, and therefore reduced their
carrying values by $1,600,000, $560,000, $590,000, $1,250,000, and $770,000 to
$9,032,000, $6,234,000, $2,397,000, $2,740,000, and $2,612,000, respectively.
-17-
<PAGE> 18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Recent Accounting Pronouncements.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
standards for the reporting and display of comprehensive income and its
components (revenue, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS 130 requires all items that are
necessary to be recognized under accounting standards as components of
comprehensive income to be reported in a financial statement that is displayed
with the same prominence as other financial statements. SFAS 130 does not
require a specific format for that financial statement, but requires that an
enterprise display an amount representing total comprehensive income for the
period covered by that financial statement. SFAS 130 requires an enterprise to
(a) classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS 130 is effective for fiscal
years beginning after December 15, 1997. The adoption of SFAS 130 will not have
an impact on the Partnership's financial reporting.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for public business enterprises to
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This statement supersedes FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise," but
retains the requirement to report information about major customers. It amends
FASB Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries," to
remove the special disclosure requirements for previously unconsolidated
subsidiaries. SFAS 131 requires, among other items, that a public business
enterprise report a measure of segment profit or loss, certain specific
revenue and expense items, segment assets, information about the revenues
derived from the enterprise's products or services and major customers. SFAS
131 also requires that the enterprise report descriptive information about the
way that the operating segments were determined and the products and services
provided by the operating segments. SFAS 131 is effective for financial
statements for periods beginning after December 15, 1997. In the initial year
of application, comparative information for earlier years is to be restated.
SFAS 131 need not be applied to interim financial statements in the initial
year of its application, but comparative information for interim periods in the
initial year of application is to be reported in financial statements for
interim periods in the second year of application. The adoption of SFAS 131
will not have a material impact on the Partnership's financial reporting.
-18-
<PAGE> 19
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report........................................................... F-2
Financial Statements:
Statement of Net Assets in Liquidation as of December 31, 1997.................. F-3
Statement of Changes of Net Assets in Liquidation for the Nine
Months Ended December 31, 1997.................................................. F-4
Balance Sheet as of December 31, 1996........................................... F-5
Statements of Operations for the Three Months Ended March 31, 1997
and the Years Ended December 31, 1996 and 1995.................................. F-6
Statements of Changes in Partners' Capital for the Three Months Ended
March 31, 1997 and for the Years Ended December 31, 1996
and 1995........................................................................ F-7
Statements of Cash Flows for the Three Months Ended March 31, 1997
and the Years Ended December 31, 1996 and 1995.................................. F-8
Notes to Financial Statements................................................... F-9
Schedule:
III - Real Estate in Liquidation and Accumulated Depreciation as of
December 31, 1997............................................................... F-21
</TABLE>
Information required by other schedules called for under Regulation S-X is
either not applicable or is included in the financial statements.
F-1
<PAGE> 20
DAMSON/BIRTCHER REALTY INCOME FUND-I
INDEPENDENT AUDITORS' REPORT
To Damson/Birtcher Partners, as General Partner of
Damson/Birtcher Realty Income Fund-I:
We have audited the financial statements of Damson/Birtcher Realty Income
Fund-I, a limited partnership as listed in the accompanying index. In connection
with our audits of the financial statements, we also have audited the financial
statement schedule listed in the accompanying index. These financial statements
and the financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets in liquidation as of December 31, 1997 and
financial position as of December 31, 1996 of Damson/Birtcher Realty Income
Fund-I, and the changes of net assets in liquidation for the nine months ended
December 31, 1997 and the results of its operations and its cash flows for the
three months ended March 31, 1997 and each of the years in the two-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles applied on the bases of accounting discussed in note 2. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in notes 1 and 2 to the financial statements, Damson/Birtcher
Realty Income Fund-I has changed its basis of accounting as of March 31, 1997
from the going-concern basis to the liquidation basis.
KPMG PEAT MARWICK LLP
Orange County, California
March 6, 1998
F-2
<PAGE> 21
DAMSON/BIRTCHER REALTY INCOME FUND-I
STATEMENT OF NET ASSETS IN LIQUIDATION
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS (Liquidation Basis):
Properties $36,090,000
Cash and cash equivalents 461,000
Accounts receivable 100,000
Other assets 99,000
-----------
Total Assets 36,750,000
-----------
LIABILITIES (Liquidation Basis):
Accounts payable and accrued liabilities 945,000
Secured loan payable 2,730,000
Accrued expenses for liquidation (including
prepayment penalty) 1,049,000
-----------
Total Liabilities 4,724,000
-----------
Net Assets in Liquidation $32,026,000
===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-3
<PAGE> 22
DAMSON/BIRTCHER REALTY INCOME FUND-I
STATEMENT OF CHANGES OF NET ASSETS IN LIQUIDATION
FOR THE NINE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Net assets in liquidation at March 31, 1997 $32,002,000
Increase (decrease) during period:
Operating activities:
Property operating income, net 2,308,000
Interest income 22,000
General and administrative expenses (874,000)
Interest expense on mortgage payable (190,000)
Leasing commissions (134,000)
------------
1,132,000
------------
Liquidating activities:
Distribution to partners (767,000)
Provision for liquidation expenses (341,000)
------------
(1,108,000)
------------
Net increase in assets in liquidation 24,000
-----------
Net assets in liquidation at December 31, 1997 $32,026,000
===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-4
<PAGE> 23
DAMSON/BIRTCHER REALTY INCOME FUND-I
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-------------
<S> <C>
ASSETS
Properties held for sale (net of valuation
allowance of $5,418,000) $34,582,000
Cash and cash equivalents 711,000
Accounts receivable (net of allowance for
doubtful accounts of $46,000) 80,000
Accrued rent receivable 439,000
Prepaid expenses and other assets, net 670,000
-----------
$36,482,000
===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 937,000
Secured loan payable 2,932,000
-----------
Total liabilities 3,869,000
-----------
Partners' capital (deficit):
Limited Partners 33,104,000
General Partner (491,000)
-----------
32,613,000
Commitments and contingencies
-----------
$36,482,000
===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-5
<PAGE> 24
DAMSON/BIRTCHER REALTY INCOME FUND-I
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS FOR THE YEARS
ENDED ENDED DECEMBER 31,
MARCH 31, -----------------------------
1997 1996 1995
------------ -----------------------------
<S> <C> <C> <C>
REVENUES:
Rental income $1,479,000 $6,125,000 $ 5,917,000
Interest and other income 10,000 60,000 56,000
Gain on sale of property - 164,000 -
----------- ----------- -----------
Total revenues 1,489,000 6,349,000 5,973,000
----------- ----------- -----------
EXPENSES:
Operating expenses 377,000 1,802,000 1,845,000
Real estate taxes 201,000 665,000 967,000
Depreciation and
amortization 70,000 233,000 2,069,000
General and administrative 369,000 982,000 1,005,000
Interest 66,000 331,000 289,000
Adjustment to carrying value
of real estate - 1,936,000 4,770,000
----------- ----------- -----------
Total expenses 1,083,000 5,949,000 10,945,000
----------- ----------- -----------
NET INCOME (LOSS) $ 406,000 $ 400,000 $(4,972,000)
=========== =========== ============
NET INCOME (LOSS) ALLOCABLE TO:
General Partner $ 4,000 $ 4,000 $ (50,000)
=========== =========== ============
Limited Partners $ 402,000 $ 396,000 $(4,922,000)
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-6
<PAGE> 25
DAMSON/BIRTCHER REALTY INCOME FUND-I
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND THE YEARS ENDED DECEMBER 31,
1996 AND 1995
---------------------------------------------
GENERAL LIMITED
PARTNER PARTNERS TOTAL
---------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1994 $(432,000) $40,395,000 $39,963,000
Net loss (50,000) (4,922,000) (4,972,000)
Distributions (8,000) (759,000) (767,000)
---------- ------------ ------------
Balance, December 31, 1995 (490,000) 34,714,000 34,224,000
Net income 4,000 396,000 400,000
Distributions (5,000) (2,006,000) (2,011,000)
---------- ------------ ------------
Balance, December 31, 1996 (491,000) 33,104,000 32,613,000
Net income 4,000 402,000 406,000
Distributions (2,000) (253,000) (255,000)
---------- ------------ ------------
Balance, March 31, 1997 $(489,000) $33,253,000 $32,764,000
========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-7
<PAGE> 26
DAMSON/BIRTCHER REALTY INCOME FUND-I
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS FOR THE YEARS
ENDED ENDED DECEMBER 31,
MARCH 31, -----------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 406,000 $ 400,000 $ (4,972,000)
Adjustments to reconcile net income
(loss)to net cash provided by
operating activities:
Depreciation and amortization 70,000 233,000 2,069,000
Adjustment to carrying value of
real estate - 1,936,000 4,770,000
Gain on sale of property - (164,000) -
Changes in:
Accounts receivable (48,000) (37,000) 41,000
Accrued rent receivable 6,000 4,000 (27,000)
Prepaid expenses and other assets 112,000 (193,000) (213,000)
Accounts payable and accrued
liabilities (146,000) (216,000) 109,000
----------- ----------- ----------
Net cash provided by operating
activities 400,000 1,963,000 1,777,000
---------- ----------- ----------
Cash flows from investing activities:
Investments in real estate (34,000) (2,287,000) (1,188,000)
Proceeds from sale of property - 2,929,000 -
---------- ----------- ----------
Net cash provided by (used in)
investing activities (34,000) 642,000 (1,188,000)
---------- ----------- -----------
Cash flows from financing activities:
Proceeds from secured loan - 700,000 -
Principal payments on secured
loans payable (49,000) (884,000) (169,000)
Distributions (255,000) (2,011,000) (767,000)
---------- ----------- -----------
Net cash used in financing
activities (304,000) (2,195,000) ( 936,000)
---------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 62,000 410,000 (347,000)
Cash and cash equivalents,
beginning of period 711,000 301,000 648,000
---------- ----------- ----------
Cash and cash equivalents,
end of period $ 773,000 $ 711,000 $ 301,000
========== =========== ==========
Supplemental disclosure of cash flow
information - cash paid during the
period for interest $ 66,000 $ 331,000 $ 289,000
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-8
<PAGE> 27
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Operations
Damson/Birtcher Realty Income Fund-I (the "Partnership") is a limited
partnership formed on May 7, 1984, under the laws of the Commonwealth of
Pennsylvania, for the purpose of acquiring and operating income-producing
retail, commercial and industrial properties. The General Partner of the
Partnership is Damson/Birtcher Partners, a general partnership originally
consisting of Equity Properties, Inc. ("EPI"), an indirect, wholly-owned
subsidiary of Damson Oil Corporation and Birtcher Partners, a California
general partnership. In December 1992, EPI withdrew as a general partner
of the Damson/Birtcher Partners and LF Special Fund II, L.P. was added as
a general partner of the General Partner. Under the terms of the General
Partner's Partnership Agreement, Birtcher Partners or its affiliates,
remains responsible for the day-to-day management of the Partnership's
assets.
In January 1993, the General Partner filed an Information Statement with
the Securities and Exchange Commission seeking consent of the Limited
Partners to amend the Partnership Agreement. On June 24, 1993, the
Partnership completed its solicitation of written consent from its
Limited Partners. A majority in interest of the Partnership's Limited
Partners approved each of the proposals contained in the Information
Statement, dated May 5, 1993. Those proposals were implemented by the
Partnership as contemplated by the Information Statement as amendments to
the Partnership Agreement, and have been reflected in these financial
statements as such.
The amendment modified the Partnership Agreement to eliminate the General
Partner's 10% subordinated interest in distributions of Distributable
Cash (net cash from operations) and reduce its subordinated interest in
such distributions from 10% to 1%. The amendment also modified the
Partnership Agreement to eliminate the General Partner's 10% subordinated
interest in Sale or Financing Proceeds (net cash from sale or financing
of Partnership property) and to reduce its subordinated interest in such
proceeds from 15% to 1%. In lieu thereof, the Partnership Agreement
provides for the Partnership's payment to the General Partner of an
annual asset management fee equal initially to .75% of the aggregate
appraised value of the Partnership's properties. At January 1, 1998 and
1997 the portfolio was appraised at an aggregate value of approximately
$38,085,000 and $40,390,000 (unaudited), respectively. The factor used to
calculate the annual asset management fee is reduced by .10% each year
beginning after December 31, 1996 (e.g., from .75% in 1996 to .65% in
1997 and .55% in 1998).
The amendment modified the Partnership Agreement to eliminate the
subordination provisions with respect to leasing fees payable under that
subsection. The amendment also eliminated the deferred leasing fees
earned by the General Partner or its affiliates (approximately $448,000
as of December 31, 1992) on or after the effective date of the amendment.
Fees for leasing services rendered by the General Partner or its
affiliates (post amendment) have been payable by the Partnership on a
current basis and have not been subordinated to the Limited Partners
Preferred Return and Adjusted Invested Capital or any other amount.
F-9
<PAGE> 28
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(1) Organization and Operations (Cont'd.)
The amendment modified the Partnership Agreement to eliminate the
subordination provision with respect to future property disposition fees
payable under that section. The amendment authorized payment to the
General Partner and its affiliates of the property disposition fee as
earned. The fee is not subordinated to the Limited Partners Preferred
Return and Adjusted Invested Capital or any other amount.
The disposition fees are to be paid to the General Partner or its
affiliates in an amount equal to 50% of the competitive real estate
brokerage commission that would be charged by unaffiliated third-parties
providing comparable services in the area in which a property is located,
but in no event more than three percent of the gross sale price of the
property, and are to be reduced by the amount by which any brokerage or
similar commissions paid to any unaffiliated third-parties in connection
with the sale of property exceed three percent of the gross sale price.
This amount is not payable, unless and to the extent that the sale price
of the property in question, net of any other brokerage commissions (but
not other costs of sale), exceeds the appraised value of the property as
of January 1, 1993.
The amendment stated that the Partnership is no longer authorized to pay
the General Partner or its affiliates any insurance commissions or any
property financing fees. No such commissions or fees have been paid or
accrued by the Partnership since its inception.
The amendment modified the provisions of the Partnership Agreement
regarding allocations of Partnership income, gain and other tax items
between the General Partner and the Limited Partners primarily to conform
to the changes in the General Partner's interest in distributions of
Distributable Cash and Sale or Financing Proceeds, as defined, effected
by the amendment.
It is not anticipated that the adoption and implementation of the
amendment will have any material adverse effect on future allocations of
income, gain, loss or other tax items to the Limited Partners. However,
if any of the Partnership's properties are sold for a gain, a special
allocation to the General Partner may have the effect of reducing the
amount of Sale or Financing Proceeds otherwise distributable to the
Limited Partners and correspondingly increasing the amount of such
distributions to be retained by the General Partner. The amount of such
distributions to be affected would be approximately equal to any deficit
balance, if any, in the General Partner's capital account in the
Partnership at the time of the allocation.
The Limited Partners have certain priorities in the allocation of cash
distributions by the Partnership. Out of each distribution of net cash,
the Limited Partners generally have certain preferential rights to
receive payments that, together with all previous payments to them, would
provide an overall 9% per annum (cumulative non-compounded) return (a "9%
Preferential Return") on their investment in the Partnership. Any
distributions not equaling this 9% Preferential Return in any quarter are
to be made up in
F-10
<PAGE> 29
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(1) Organization and Operations (Cont'd.)
subsequent periods if and to the extent distributable cash is available.
Distributable cash from operations is paid out each quarter in the
following manner: 99% to the Limited Partners and 1% to the General
Partner. These payments are made each quarter to the extent that there is
sufficient distributable cash available.
Sale or financing proceeds are to be distributed, to the extent
available, as follows: (i) to the Limited Partners until all cash
distributions to them amount to a 9% Preferential Return on their
investment cumulatively from the date of their admission to the
Partnership; (ii) then to the Limited Partners in an amount equal to
their investment; and (iii) the remainder, if any, 99% to Limited
Partners and 1% to the General Partner.
Although the unpaid 9% Preferential Return to the Limited Partners'
aggregates $77,610,000 as of December 31, 1997, it is anticipated that
the limited partners will not realize this return due to a comparable
liquidation value of $32,026,000.
Income or loss for financial statement purposes is allocated 99% to the
Limited Partners and 1% to the General Partner.
The amendment modified the Partnership Agreement so as to restrict the
Partnership from entering into a future "Reorganization Transaction" (as
defined in the amendment) sponsored by the General Partner or any of its
affiliates unless such transaction is approved by a "supermajority" of at
least 80% in interest of the Limited Partners and the General Partner.
The amendment also prohibits the modification of this restriction on
Reorganization Transactions without the approval of at least 80% in
interest of the Limited Partners.
The Partnership's original investment objectives contemplated that it
would hold its properties for a period of at least five years, with
decisions about the actual timing of property sales or other dispositions
to be left to the General Partner's discretion based on the anticipated
remaining economic benefits of continued ownership and other factors.
On February 18, 1997, the Partnership mailed a Consent Solicitation to
the Limited Partners which sought their consent to dissolve the
Partnership and sell and liquidate all of its remaining properties as
soon as practicable, consistent with obtaining reasonable value for the
Partnership's properties. A majority in interest of the Limited Partners
consented by March 14, 1997. As a result, the Partnership has adopted the
liquidation basis of accounting as of March 31, 1997. The difference
between the adoption of the liquidation basis of accounting as of March
14, 1997 and March 31, 1997 was not material.
Under the liquidation basis of accounting, assets are stated at their
estimated net realizable values and liabilities are stated at their
F-11
<PAGE> 30
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(1) Organization and Operations (Cont'd.)
anticipated settlement amounts. The valuation of assets and liabilities
necessarily requires many estimates and assumptions, and there are
substantial uncertainties in carrying out the dissolution of the
Partnership. The actual values upon dissolution and costs associated
therewith could be higher or lower than the amounts recorded.
The Partnership adopted the liquidation basis of accounting on March 31,
1997. Comparison of results to prior years, therefore, is not practical.
The Statement of Net Assets in Liquidation and Statement of Changes of
Net Assets in Liquidation reflect the Partnership in the process of
liquidation. Prior financial statements reflect the Partnership as a
going concern.
Since the approval of the February 18, 1997 Consent Solicitation, the
General Partner has been evaluating possible sales of Partnership
properties, individually and as a portfolio, to liquidate and wind up the
Partnership. Recently, the General Partner has solicited several offers
from prospective purchasers to acquire all of the Partnership's remaining
properties in a single transaction. The General Partner is evaluating
these offers, and expects to either accept an offer or counter one or
more of the offers soon. The offers are substantially similar in price,
and value the Partnership's remaining properties on a collective basis at
the high end of the range that the General Partner previously discussed
in the February 18, 1997 Consent Solicitation. To help evaluate these
offers, the General Partner is also evaluating local market conditions
and potential sales of the properties on an individual basis. There can
be no assurance as to when or at what price properties will be sold. If
an agreement can be reached to sell the properties in a single
transaction, the General Partner expects to complete such a transaction
in 1998.
As of December 31, 1995 the General Partner decided to treat its
properties as held for sale, instead of for investment, for financial
statement purposes given the mandate of the May 5, 1993 Information
Statement. Since adoption of the 1993 amendment, the General Partner has
considered several preliminary indications of interest from third parties
to acquire some or all of the Partnership's properties. Apart from the
sale of Arlington Executive Plaza, these transactions never materialized,
primarily because the General Partner rejected as too low the valuations
of the Partnership's remaining properties as proposed by the potential
purchasers. The Partnership's properties were held for sale throughout
1996 and 1997 and continue to be held for sale.
In accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and the liquidation basis of accounting adopted
on March 31, 1997 (see Note 2), the carrying value of these properties
was evaluated to ensure that each property was carried on the
Partnership's balance sheet at the lower of cost or fair value less
estimated selling costs and estimated net realizable value, respectively.
The General Partner estimated fair value and net realizable value for
this purpose based on appraisals performed as of January 1, 1998 at
December 31, 1997 and as of January 1, 1997 at December 31, 1996.
The January 1, 1998 appraisals assume that the properties will be sold
within approximately the next year and that the sales will take place on
a property by property basis between willing buyers and willing sellers.
Among the strategies the General Partner will consider to accomplish the
dissolution is a sale of the Partnership's portfolio in a single
transaction, or a sale of some or all of the Partnership's properties in
a "package" with properties of affiliated partnerships. If the properties
were sold in a "package" such sale would most likely result in a lower
aggregate sales price, but more rapid distribution of dissolution
proceeds to the Limited Partners, as compared to a series of individual
sale transactions. Furthermore, fair value can only be determined based
upon sales to third parties, and sales proceeds could differ
substantially from appraised values.
F-12
<PAGE> 31
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(2) Summary of Significant Accounting Policies
Liquidation Basis
The Partnership adopted the liquidation basis of accounting as of March
31, 1997. The liquidation basis of accounting is appropriate when
liquidation appears imminent, the Partnership can no longer be classified
as a going concern and the net realizable values of the Partnership's
assets are reasonably determinable. Under this method of accounting,
assets and liabilities are stated at their estimated net realizable
values and costs of liquidating the Partnership are provided to the
extent reasonably determinable.
Carrying Value of Real Estate (prior to the adoption of the liquidation
basis of accounting)
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," ("FAS
121"). This Statement requires that if the General Partner believes
factors are present that may indicate long-lived assets are impaired, the
undiscounted cash flows, before debt service, related to the assets
should be estimated. If these estimated cash flows are less than the
carrying value of the asset, then impairment is deemed to exist. If
impairment exists, the asset should be written down to the estimated fair
value.
Further, assets held for sale, including any unrecoverable accrued rent
receivable or capitalized leasing commissions, should be carried at the
lower of carrying value or fair value less estimated selling costs. Any
adjustment to carrying value is recorded as a valuation allowance against
property held for sale. Each reporting period, the General Partner
reviews their estimates of fair value, which are decreased or increased
up to the original carrying value. Finally, assets held for sale are no
longer depreciated. The adoption of FAS 121 did not have a material
impact on the Partnership's operations or financial position as the
General Partner adopted FAS 121 at December 31, 1995 and prior to
December 31, 1995, the Partnership did not have any properties held for
sale.
As noted above, as of December 31, 1995 the General Partner decided to
account for the Partnership's properties as assets held for sale, instead
of for investment. Assuming a 12 month holding period, the General
Partner compared the carrying value of each property to its appraised
value as of January 1, 1996. If the carrying value of a property and
certain related assets were greater than its appraised value, less
estimated selling costs, the General Partner reduced the carrying value
of the property by the difference. Using this methodology, the General
Partner determined that The Cornerstone, Ladera I Shopping Center,
Terracentre, Arlington Executive Plaza, and Washington Technical Center
had carrying values greater than they had appraised values, and therefore
reduced their carrying values by $1,600,000, $560,000, $590,000,
$1,250,000, and $770,000 to $9,032,000, $6,234,000, $2,397,000,
$2,740,000, and $2,612,000, respectively.
F-13
<PAGE> 32
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(2) Summary of Significant Accounting Policies (Cont'd.)
Utilizing the same methodology, assuming a 12 month holding period, for
the year ended December 31, 1996, the General Partner determined that The
Cornerstone, Ladera-I Shopping Center and Oakpointe had carrying values
greater than their respective appraised values. As a result, the carrying
values were adjusted by $1,683,000, $398,000, and $253,000 to $8,960,000,
$5,900,000, and $7,700,000, respectively. In addition, during 1996, the
carrying value of Terracentre and Washington Technical Center were
increased by $190,000 and $246,000 to their estimated fair values less
estimated selling costs $2,900,000 and $3,020,000, respectively.
Cash and Cash Equivalents
The Partnership invests its excess cash balances in short-term
investments (cash equivalents). These investments are stated at cost,
which approximates market, and consist of money market, certificates of
deposit and other non-equity-type cash investments. Cash equivalents at
December 31, 1997 and 1996, totaled $425,000 and $711,000, respectively.
Cash equivalents are defined as temporary non-equity investments with
original maturities of three months or less, which can be readily
converted into cash and are not subject to changes in market value.
Depreciation
Through December 31, 1995, depreciation expense was computed using the
straight-line method. Rates used in the determination of depreciation
were based upon the following estimated useful lives:
Years
-------
Buildings 30
Building improvements 3 to 30
Revenue Recognition
Through March 31, 1997, rental income pertaining to operating lease
agreements which specify scheduled rent increases or free rent periods,
was recognized on a straight-line basis over the period of the related
lease agreement. After March 31, 1997, rental income has been recognized
according to the lease terms.
F-14
<PAGE> 33
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(2) Summary of Significant Accounting Policies (Cont'd.)
Income Taxes
Income taxes are not levied at the Partnership level, but rather on the
individual partners; therefore, no provision or liability for Federal and
State income taxes has been reflected in the accompanying financial
statements.
Following are the Partnership's assets and liabilities as determined in
accordance with generally accepted accounting principles ("GAAP")
(liquidation basis of accounting and going concern basis) and for federal
income tax reporting purposes at December 31:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------- -----------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
(LIQUIDATION) (UNAUDITED) (GOING CONCERN) (UNAUDITED)
- -------------------- ------------------- ------------------ --------------------- -------------
<S> <C> <C> <C> <C>
Total Assets $36,750,000 $48,911,000 $36,482,000 $48,615,000
Total
Liabilities $ 4,724,000 $ 3,675,000 $ 3,869,000 $ 3,869,000
</TABLE>
Following are the differences between Financial Statement and tax return
income:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) per
Financial Statements (period
ending March 31, 1997 for
1997) $ 406,000 $ 400,000 $(4,972,000)
Change in net assets in
liquidation from operating
activities for the nine months
ended December 31, 1997 1,132,000 - -
Adjustment to carrying value
of real estate - 1,936,000 4,770,000
Depreciation differences on
investments in real estate (2,721,000) (3,046,000) (1,157,000)
Loss on sale of property in
excess of book value - (2,919,000) -
Other 49,000 (63,000) 85,000
- --------------------------------------------------------------------------------------------------
Taxable income (loss) per
Federal tax return (unaudited) $(1,134,000) $(3,692,000) $(1,274,000)
==================================================================================================
</TABLE>
F-15
<PAGE> 34
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(2) Summary of Significant Accounting Policies (Cont'd.)
Significant Tenants
Rental income from Certified Warehouse and Transfer Company, Inc.,
totaled $872,000 in 1997, $1,007,000 in 1996, and $984,000 in 1995, or
approximately 15%, 16% and 17%, respectively, of the Partnership's total
rental income. Rental income from FISERV, Inc. (formerly d.b.a. Citicorp
CIR, Inc.) totaled $869,000 in 1997, $887,000 in 1996 and $880,000 in
1995, or approximately 15%, 14% and 15%, respectively, of the
Partnership's total rental income.
Certified's lease expired on September 20, 1997, at which time it vacated
approximately 61% of its space. It continued to pay rent on its remaining
space through November 1997, at which time it vacated the property
entirely. The General Partner leased 123,074 square feet (39%) to a
different tenant for a three-year term commencing March 1, 1998 for
$406,000 per year, which is greater than Certified had been paying on a
per square foot basis.
Earnings and Distributions Per Unit
The Partnership Agreement does not designate investment interests in
units. All investment interests are calculated on a "percent of
Partnership" basis, in part to accommodate original reduced rates on
sales commissions for subscriptions in excess of certain specified
amounts. A Limited Partner who was charged a reduced sales commission or
no sales commission was credited with proportionately larger Invested
Capital and therefore had a disproportionately greater interest in the
capital and revenues of the Partnership than a Limited Partner who paid
commissions at a higher rate.
As a result, the Partnership has no set unit value as all accounting,
investor reporting and tax information is based upon each investor's
relative percentage of Invested Capital. Accordingly, earnings or loss
per unit is not presented in the accompanying financial statements.
Estimations
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses or changes in net assets during the reporting period. Actual
results could differ from those estimates.
(3) Transactions with Affiliates
The Partnership has no employees and, accordingly, the General Partner
and its affiliates perform services on behalf of the Partnership in
connection with administering the affairs of the Partnership. The General
Partner and affiliates are reimbursed for their general and
administrative costs actually incurred and associated with services
performed on behalf of the Partnership. For the years ended December 31,
1997, 1996 and 1995, the Partnership was charged with approximately
$157,000, $178,000 and $226,000, respectively, of such expenses.
F-16
<PAGE> 35
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(3) Transactions with Affiliates (Cont'd.)
An affiliate of the General Partner provides property management services
with respect to the Partnership's properties and receives a fee for such
services not to exceed 3% of the gross receipts from the properties under
management. Such fees amounted to approximately $165,000 in 1997,
$178,000 in 1996 and $161,000 in 1995. In addition, the affiliate of the
General Partner received $315,000 in 1997, $367,000 in 1996 and $321,000
in 1995, as reimbursement of costs for on-site property management
personnel and other reimbursable costs.
The amended Partnership Agreement provides for the Partnership's payment
to the General Partner of an annual asset management fee equal to .75% of
the aggregate appraised value of the Partnership's properties as
determined by independent appraisal undertaken in January of each year
for 1995 and 1996 and .65% for 1997. Such fees for the year ended
December 31, 1997, 1996 and 1995, amounted to $245,000, $301,000 and
$304,000, respectively. In addition, the amended Partnership Agreement
provides for payment to the General Partner of a leasing fee for services
rendered in connection with leasing space in a Partnership property after
the expiration or termination of any lease of such space including
renewal options. Fees for leasing services for the year ended December
31, 1997, 1996 and 1995, amounted to $25,000, $21,000 and $58,000,
respectively.
(4) Gain on Disposition of Assets
On November 21, 1996, the Partnership sold Arlington Executive Plaza, an
office complex composed of seven identical 10,428 square foot buildings
located on 7.2 acres of land in Arlington Heights, Illinois to an
unaffiliated third party. The gross sales price was $3,050,000
($2,929,000 net of commissions and escrow fees) and the net proceeds of
the sale, after all prorations and credits to the buyer, amounted to
approximately $2,699,000. In December 1995, the General Partner had
adjusted the carrying value of the property in accordance with the
guidelines of FAS 121, which resulted in a write-down of $1,250,000 and
an adjusted carrying value of $2,740,000. The resulting gain on sale,
after taking into consideration all costs of disposition, amounted to
$164,000 as reflected in the Statement of Operations. The General Partner
was not paid a commission or disposition fee as part of this transaction.
(5) Commitments and Contingencies
Litigation
The Partnership is not a party to any material pending legal proceedings
other than ordinary routine litigation incidental to its business. It is
the General Partner's belief that the outcome of these proceedings will
not be material to the business, financial condition, or results of
operations of the Partnership.
F-17
<PAGE> 36
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(5) Commitments and Contingencies (Cont'd.)
Future Minimum Annual Rentals
The Partnership has determined that all leases which had been executed as
of December 31, 1997, are properly classified as operating leases for
financial reporting purposes. Future minimum annual rental income to be
received under such leases as of December 31, 1997, are as follows:
Year Ending December 31,
------------------------
1998 $ 3,916,000
1999 3,678,000
2000 2,912,000
2001 1,785,000
2002 1,498,000
Thereafter 5,916,000
-----------
$19,705,000
===========
Certain of these leases also provide for, among other things: tenant
reimbursements to the Partnership of certain operating expenses; payments
of additional rents in amounts equal to a set percentage of the tenant's
annual revenue in excess of specified levels; and escalations in annual
rents based upon the Consumer Price Index.
(6) Secured Loan Agreements
In September 1987, the Partnership borrowed $4,000,000 pursuant to a loan
agreement secured by a First Deed of Trust on the Certified Distribution
Center in Salt Lake City, Utah. That loan matured on October 1, 1990,
however, the General Partner obtained a loan extension that was to mature
December 1, 1993. On July 30, 1993, the Partnership obtained a new loan
secured by a First Deed of Trust on the Certified Distribution Center in
Salt Lake City, Utah. The new loan, in the amount of $3,500,000, carries
a fixed interest rate of 9% per annum over a 13-year fully amortizing
term and a prepayment penalty of approximately $600,000 at current
interest rates, if fully paid off after July 1, 1998. The Partnership's
first payment of $38,000 was paid on September 1, 1993, with monthly
installments due thereafter.
Future principal payments to the lender under the loan as of December 31,
1997, are as follows:
Year Ending December 31,
------------------------
1998 $ 221,000
1999 242,000
2000 264,000
2001 289,000
2002 316,000
Thereafter 1,398,000
----------
$2,730,000
==========
The General Partner believes the fair value of this secured loan
approximates the carrying value, based on the interest rate charged for
the loan.
F-18
<PAGE> 37
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(6) Secured Loan Agreements (Cont'd.)
In March 1996, the Partnership entered into a loan agreement pursuant to
which it may borrow up to $1,500,000, evidenced by a note secured by a
first deed of trust and financing statement on the Ladera I Shopping
Center in Albuquerque, New Mexico. Pursuant to the note and loan
agreement, the Partnership borrowed $700,000 in March 1996. The
Partnership made interest only payments at the rate of 1% over prime (the
loan rate was 9.25%) through November 1996, when the entire balance was
paid off utilizing a portion of the proceeds from the sale of Arlington
Executive Plaza. The net proceeds of the foregoing loan were used to fund
a portion of the renovation and tenant improvements at The Cornerstone
and tenant improvements at Oakpointe.
(7) Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
-------------------------------
<S> <C> <C>
Real estate taxes $ 576,000 $ 498,000
Accounts payable and other 369,000 439,000
-------- ---------
$ 945,000 $ 937,000
========= =========
</TABLE>
(8) Accrued Expenses for Liquidation
Accrued expenses for liquidation as of December 31, 1997, includes
estimates of costs to be incurred in carrying out the dissolution and
liquidation of the Partnership. These costs include estimates of legal
fees, accounting fees, tax preparation and filing fees, other
professional services, the general partner's liability insurance and the
pre-payment penalty associated with the anticipated early retirement of
the mortgage loan secured by the Certified Warehouse property. The actual
costs could vary significantly from the related provisions due to the
uncertainty related to the length of time required to complete the
liquidation and dissolution and the complexities which may arise in
disposing of the Partnership's remaining assets.
F-19
<PAGE> 38
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
(9) Allowance for Doubtful Accounts
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995
----------------------------
<S> <C> <C>
Balance at beginning of year $ 63,000 $ -
Additions charged to expense 21,000 63,000
Write-offs (38,000) -
--------- --------
Balance at end of year $ 46,000 $ 63,000
========= ========
</TABLE>
(10) Subsequent Event
On February 28, 1998, the Partnership made an aggregate cash distribution
of $253,000 to its Limited Partners.
F-20
<PAGE> 39
DAMSON/BIRTCHER REALTY INCOME FUND-I
SCHEDULE III
REAL ESTATE IN LIQUIDATION AND ACCUMULATED DEPRECIATION
As of December 31, 1997
(Amounts in Thousands)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
- --------------------------------------------------- ------- ------------------ -------------------
COSTS CAPITALIZED
INITIAL COST TO SUBSEQUENT TO THE
PARTNERSHIP (C) ACQUISITION
------------------ -------------------
BLDGS
AND CARRYING
DESCRIPTION ENCUM- IMPROVE- IMPROVE- COSTS
(A) BRANCES LAND MENTS ments (D),(B)
- --------------------------------------------------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Washington Technical Center, Phase I
Renton, WA $ -- $ 865 $ 3,252 $ 1,260 $ (2,253)
Certified Distribution Center
Salt Lake City, UT 2,730 1,160 8,751 58 (3,135)
Ladera Shopping Center, Phase I
Albuquerque, NM -- 2,107 6,971 356 (3,504)
The Cornerstone
Tempe, AZ -- 4,620 14,115 3,854 (13,232)
Terracentre
Denver, CO -- 1,458 19,939 2,432 (20,736)
Oakpointe
Arlington Heights, IL -- 1,249 8,852 2,994 (5,344)
------ ------- ------- -------- --------
Total $2,730 $11,459 $61,880 $10,954 $(48,204)
====== ======= ======= ======== ========
<CAPTION>
COL. A COL. E COL. F COL. H COL. I
- --------------------------------------------------- ---------------------------- -------- -------- --------
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
(B)
----------------------------
BLDGS ACCUMU-
AND LATED DEPRECI-
DESCRIPTION IMPROVE- TOTAL DEPRECI- DATE ABLE
(A) LAND MENTS (E) ATION(E) ACQUIRED LIFE(F)
- --------------------------------------------------- ------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Washington Technical Center, Phase I
Renton, WA $ 859 $ 2,266 $ 3,125 -- 12/19/84 30 years
Certified Distribution Center
Salt Lake City, UT 1,160 5,674 6,834 -- 04/02/85 30 years
Ladera Shopping Center, Phase I
Albuquerque, NM 2,097 3,834 5,931 -- 05/10/85 30 years
The Cornerstone
Tempe, AZ 3,597 5,759 9,356 -- 07/19/85 30 years
Terracentre
Denver, CO 491 2,602 3,093 -- 09/06/85 30 years
Oakpointe
Arlington Heights, IL 1,119 6,632 7,751 -- 09/18/85 30 years
------- ------- ------- -- -------- --------
Total $9,323 $26,767 $36,090 --
======= ======= ======= == ======== ========
</TABLE>
NOTE: Column G is not applicable.
See notes to schedule on following page.
F-21
<PAGE> 40
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO SCHEDULE III
(a) For a description of the properties, see "Item 2. Properties."
(b) Upon adoption of the liquidation basis of accounting on March 31, 1997,
accumulated depreciation was deleted through an adjustment to the cost
of the properties.
For the year ended December 31, 1996, the General Partner determined
that the carrying values of The Cornerstone, Ladera-I Shopping Center
and Oakpointe were in excess of their respective appraised values. As a
result, their carrying values were adjusted by $1,683,000, $398,000, and
$253,000 to $8,960,000, $5,900,000, and $7,700,000, respectively. In
addition, during 1996, the carrying values of Terracentre and Washington
Technical Center were increased by $190,000 and $246,000 to their
estimated fair values less selling costs of $2,900,000 and $3,020,000,
respectively.
At December 31, 1995, the General Partner determined that The
Cornerstone, Ladera-I Shopping Center, Terracentre, Arlington Executive
Plaza and Washington Technical Center had carrying values greater than
they had appraised values less estimated selling costs, and therefore
provided a valuation allowance of $4,770,000 against property held for
sale.
The aggregate cost of land, buildings and improvements for Federal
income tax purposes (unaudited) was $85,173,000 as of December 31, 1997.
The difference between the aggregate cost of land, buildings and
improvements for tax reporting purposes as compared to financial
reporting purposes is primarily attributable to: (1) amounts received
under rental agreements for non-occupied space, which were recorded as
income for tax reporting purposes but were recorded as a reduction of
the corresponding property basis for financial reporting purposes, and
(2) the adjustments to the carrying value of the real estate for
financial statement purposes have no effect for tax reporting purposes.
(c) The initial cost to the Partnership includes acquisition fees paid to
the General Partner. The Partnership's cost has also been reduced by
amounts received from sellers after acquisition under rental agreements
for non-occupied space.
(d) Amounts represent funds received from sellers subsequent to acquisition
under rental agreements for non-occupied space and include adjustments
to carrying value of real estate.
F-22
<PAGE> 41
DAMSON/BIRTCHER REALTY INCOME FUND-I
NOTES TO SCHEDULE III (Cont'd.)
(e) RECONCILIATION OF REAL ESTATE
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
-------------------------------
<S> <C> <C>
Balance at beginning of year $58,549,000 $ 64,285,000
Additions during the year:
Improvements 719,000 2,287,000
Other (*) (23,178,000) -
Reductions during the year:
Disposition of Assets - (6,087,000)
Adjustment to the carrying
value of real estate - (1,936,000)
------------ -------------
Balance at end of year $36,090,000 $ 58,549,000
============ ============
</TABLE>
(*) Results from reclassification of deferred rent receivable and leasing
commissions to real estate and deletion of accumulated depreciation upon
the adoption of the liquidation basis of accounting on March 31, 1997.
RECONCILIATION OF ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1996
-------------------------------
<S> <C> <C>
Balance at beginning of year $ 23,967,000 $27,289,000
Disposition of assets -- (3,322,000)
Adjustment upon adoption of
liquidation basis of
accounting (23,967,000) --
------------ -----------
Balance at end of year $ -- $23,967,000
============ ===========
</TABLE>
(f) Through December 31, 1995, depreciation expense was computed based upon
the following estimated useful lives:
Years
-------
Buildings 30
Building improvements 3 to 30
Due to the adoption of FAS 121 on December 31, 1995 and the liquidation
basis of accounting on March 31, 1997, properties held for sale were not
F-23
<PAGE> 42
DAMSON/BIRTCHER REALTY INCOME FUND-I
depreciated in 1996 or 1997.
F-24
<PAGE> 43
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership and the General Partner have no directors or executive officers.
The General Partner of the Partnership is Damson/Birtcher Partners, a California
general partnership of which Birtcher Partners, a California general
partnership, and LF Special Fund II, L.P., a California limited partnership, are
the general partners. Under the terms of the Partnership Agreement, Birtcher
Partners is responsible for the day-to-day management of the Partnership's
assets.
The general partner of LF Special Fund II, L.P., is Liquidity Fund Asset
Management, Inc., a California corporation affiliated with Liquidity Financial
Group, L.P. The principals and officers of Liquidity Fund Asset Management, Inc.
are as follows:
o Richard G. Wollack, Chairman of the Board
o Brent R. Donaldson, President
o Deborah M. Richard, Chief Financial Officer
The general partner of Birtcher Partners is Birtcher Investments, a California
general partnership. Birtcher Investments' general partner is Birtcher Limited,
a California limited partnership and its general partner is BREICORP, a
California corporation. The principals and relevant officers of BREICORP are as
follows:
o Ronald E. Birtcher, Co-Chairman of the Board
o Arthur B. Birtcher, Co-Chairman of the Board
o Robert M. Anderson, Executive Director
Item 11. EXECUTIVE COMPENSATION
The following table sets forth the fees, compensation and other expense
reimbursements paid to the General Partner and its affiliates in all capacities
for each year in the three-year period ended December 31, 1996.
-19-
<PAGE> 44
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 11. EXECUTIVE COMPENSATION (Cont'd.)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
General Partner's 1% share of
distributable cash $ 10,000 $ 5,000 $ 8,000
Asset management fees 245,000 301,000 304,000
Property management fees 165,000 178,000 161,000
Leasing fees 25,000 21,000 58,000
Property management expense
reimbursements 315,000 367,000 321,000
Other expense reimbursements 157,000 178,000 226,000
--------- ---------- ----------
TOTAL $ 917,000 $1,050,000 $1,078,000
========= ========== ==========
</TABLE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of January 31, 1998, there was no entity or individual holding more than 5%
of the limited partnership interests of the Registrant.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning transactions to which the Registrant was or is to be
a party in which the General Partner or its affiliates had or are to have a
direct or indirect interest, see Notes 1 and 3 to the Financial Statements in
Item 8, which information is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a) 1. and 2. Financial Statements and Financial Statements Schedules:
See accompanying Index to Financial Statements and Schedules to Item 8,
which information is incorporated herein by reference.
-20-
<PAGE> 45
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(Cont'd.)
3. Exhibits:
Articles of Incorporation and Bylaws
(a) The Amended and Restated Agreement of Limited
Partnership incorporated by reference to Exhibit A
to the Partnership's prospectus contained in the
Partnership's registration statement on Form S-11
(Commission File No. 2-91065), dated June 22,
1985, as supplemented filed under the Securities
Act of 1933.
10. Material Contracts
(a) Revised Property Management Agreement dated April
2, 1985 between Birtcher Properties and the
Registrant for Certified Distribution Center.
Incorporated by reference to Exhibit 19(a)(4) of
the Partnership's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1985. (SUPERSEDED)
(b) Property Management Agreement dated May 10, 1985,
between Birtcher Properties and the Registrant for
Ladera Shopping Center. Incorporated by reference
to Exhibit 19(a)(6) of the Partnership's Quarterly
Report on Form 10-Q for the quarter ended June 30,
1985. (SUPERSEDED)
(c) Property Management Agreement dated July 17, 1985,
between Birtcher Properties and the Registrant for
The Cornerstone. Incorporated by reference to
Exhibit 19(a)(8) of the Partnership's Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1985. (SUPERSEDED)
(d) Property Management Agreement dated September 6,
1985, between Birtcher Properties and the
Registrant for Terracentre. Incorporated by
reference to Exhibit 19(a)(10) of the
Partnership's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1985. (SUPERSEDED)
(e) Property Management Agreement dated September 16,
1985, between Birtcher Properties and the
Registrant for Oakpointe (formerly Lincoln Atrium
Center). Incorporated by reference to Exhibit
19(a)(12) of the Partnership's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1985. (SUPERSEDED)
-21-
<PAGE> 46
DAMSON/BIRTCHER REALTY INCOME FUND-I
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(Cont'd.)
(f) Property Management Agreement dated October 24,
1991, between Glenborough Management Corporation
and the Registrant for Arlington Executive Plaza,
Certified Distribution Center, The Cornerstone,
Ladera-I Shopping Center, Oakpointe, Terracentre
and Washington Technical Center. Incorporated by
reference to Exhibit 1 of the Partnership's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991. (SUPERSEDED)
(g) Agreement for Partnership administrative services
dated October 24, 1991, between Glenborough
Management Corporation and the Registrant for the
services described therein. Incorporated by
reference to Exhibit 2 of the Partnership's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991. (SUPERSEDED)
(h) Property Management Agreement, dated October 29,
1993, between Birtcher Properties and the
Registrant for Arlington Executive Plaza,
Certified Distribution Center, The Cornerstone,
Ladera-I Shopping Center, Oakpointe, Terracentre,
and Washington Technical Center. Incorporated by
reference to Exhibit 1 of the Partnership
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993.
(27) Financial Data Schedule
b) Reports on Form 8-K:
None filed for the year ended December 31, 1997.
-22-
<PAGE> 47
DAMSON/BIRTCHER REALTY INCOME FUND-I
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the Undersigned, thereunto duly authorized.
DAMSON/BIRTCHER REALTY INCOME FUND-I
By: DAMSON/BIRTCHER PARTNERS By: BIRTCHER PARTNERS,
(General Partner) a California general partnership
By: BIRTCHER INVESTMENTS,
a California general partnership,
General Partner of Birtcher Partners
By: BIRTCHER LIMITED,
a California limited partnership,
General Partner of Birtcher
Investments
By: BREICORP,
a California corporation,
formerly known as Birtcher
Real Estate Inc., General
Partner of Birtcher Limited
Date: March 30, 1998 By: /s/ Robert M. Anderson
---------------------------
Robert M. Anderson
Executive Director
BREICORP
By: LF Special Fund II, L.P.,
a California limited partnership
By: Liquidity Fund Asset Management, Inc.,
a California corporation, General
Partner of LF Special Fund II, L.P.
Date: March 30, 1998 By: /s/ Brent R. Donaldson
-----------------------------------
Brent R. Donaldson
President
Liquidity Fund Asset Management,
Inc.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Damson/Birtcher
Partners (General Partner of the Registrant) and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Arthur B. Birtcher Co-Chairman of the Board - March 30, 1998
- ---------------------- BREICORP
Arthur B. Birtcher
/s/ Ronald E. Birtcher Co-Chairman of the Board - March 30, 1998
- ---------------------- BREICORP
Ronald E. Birtcher
/s/ Richard G. Wollack Chairman of Liquidity Fund March 30, 1998
- ---------------------- Asset Management, Inc.
Richard G. Wollack
</TABLE>
-23-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH DAMSON BIRTCHER REALTY INCOME
FUND I.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 461,000
<SECURITIES> 0
<RECEIVABLES> 100,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 660,000
<PP&E> 36,090,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,750,000
<CURRENT-LIABILITIES> 1,994,000
<BONDS> 2,730,000
0
0
<COMMON> 0
<OTHER-SE> 32,026,000
<TOTAL-LIABILITY-AND-EQUITY> 36,750,000
<SALES> 0
<TOTAL-REVENUES> 0<F1>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0<F1>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>STATEMENT OF OPERATIONS IS NOT PRESENTED IN LIQUIDATION BASIS OF ACCOUNTING.
</FN>
</TABLE>
